You might be fresh out of college, or a few years out. Are you thinking about retirement yet? You might be, but not in the sense of how you’re going to fund it. If you’re saddled with outrageous student loan debt, you probably haven’t given retirement funding a thought and that’s going to cost you hundreds of thousands of lost dollars when you are old and need it most. Rent, utilities, insurance, and daily living expenses are difficult enough on an entry-level salary, and student loan debt only makes it worse. Student loan assistance is available, but what’s the best option? Deferments and forbearances sound good on the surface, but delaying payments will only increase the amount of interest you pay in the long run.
If you’re looking for student loan assistance, be aware that there are scammers out there. Avoid companies that:
- Ask you for your FAFSA or Federal Student Aid PIN
- Charge a monthly fee
- Won’t provide data to back up their performance claims
- Won’t provide a money-back guarantee if they are not able to consolidate or reduce the amount of your loan
Federal or Private Loans?
It makes a difference. There are great programs out there to help provide federal student loan assistance, but private loans are trickier. Most private loans can be reduced or discharged through bankruptcy but the number of experienced bankruptcy attorneys who know how to deal with this is small.
There is one particularly decent, legitimate federal student loan assistance program out there that many don’t know about—the Public Service Loan Forgiveness program. Under this program, you can set up income-based repayment and after you have paid your student loan payments on time for 10 years, the debt is forgiven. However, this program is only available to those with government or public service careers like law enforcement, military service, education, and many health fields.
Before you borrow, try to keep in mind that you should only borrow as much as you think your first-year entry level salary will be after you graduate. That might be tough to figure out, especially if you don’t know what you’re going to major in yet. And be aware that PLUS loans will cover off-campus living expenses and meals, so you can easily rack up a lot of unnecessary debt there. Finally, I’ll say it again, don’t get a private student loan. Go federal if you can because down the road, it will be easier to get student loan assistance.
Finally, never ask anyone to cosign for student loans and never get sucked into cosigning for anyone, even if you love them. Cosigners are 100 percent responsible for the entire balance of the unaffordable student loans when they go unpaid.